Monday, September 26, 2011

What is reaffirmation? You may be interested to know that a reaffirmation agreement in bankruptcy may allow you to keep your car or house.

A reaffirmation agreement is an agreement between you and your creditor to keep your loan and your property, despite the fact that you are filing bankruptcy. You do need to continue to make the payments on time, and reaffirmed debts will continue after your bankruptcy is discharged until the loan is paid off.

This can be advantageous when filing a chapter 7 bankruptcy in which you wish to keep your car or home. While a chapter 7 bankruptcy can relieve you of the debt that you have, without a reaffirmation agreement, secured property will be repossessed or foreclosed on.

Reaffirmation is voluntary for the lender though they almost always agree if you are current on your loan payments, because they would rather get their money than not.

You may have other options to keep your property or it may not be a good idea to try and keep it. So much depends on your own unique circumstances and that's why it's so important to consult a good bankruptcy attorney. See my tips for choosing the best attorney.

Wednesday, August 24, 2011

Are you thinking of filing bankruptcy by yourself and want to know how the bankruptcy will affect your spouse? Or do you you want to know how your spouse's bankruptcy will affect you? A few things you should know about bankruptcy and spouse liability...

Can one spouse file bankruptcy? Yes. You are entitled to file bankruptcy individually but it can have varied effects on your spouse, depending on your circumstances.

You will be protected by the automatic stay in bankruptcy when you file, but your spouse will not be. If you and your spouse have no joint debts, then your spouse will not be liable for any debts that are yours alone and included in the bankruptcy.

However, if you have jointly co-signed on loans, then your spouse is still responsible for the debt, even if a discharge is granted to you. A creditor could come after your spouse for debts that you include in your bankruptcy. The exception to this would be if you filed a chapter 13 bankruptcy, in which 100 percent of the debt is to be paid back over time. Only then will your spouse be protected.

Credit reporting agencies may report the bankruptcy on your spouse's credit report, if your spouse has co-signed on any of the loans.

If you own property with your spouse and you live in a community property state (California is a community property state), it is possible that the property could be sold and the funds used to pay off creditors.

Your bankruptcy can affect future credit worthiness for any transactions that you and your spouse attempt jointly.

Of course, it can be more complicated than this depending on variables unique to your circumstance. That is why it is so important to discuss filing bankruptcy without your spouse with a bankruptcy attorney, which I am not.

Sunday, May 29, 2011

The bankruptcy homestead exemption (also referred to as the bankruptcy home exemption) protects a certain amount of equity in your home when you file a chapter 7 bankruptcy. This is the amount that you are allowed to keep before unsecured creditors are paid. Unsecured creditors are those without a lien or judgment against you.

Californians are not allowed to use the federal bankruptcy home exemption. Instead, they have two sets of bankruptcy exemptions to choose from. Under the one set, the homestead exemption increased by $25,000 as on January 1, 2010.

A homestead is defined as any real or personal property that you occupy and could include a mobile home, boat, condo, or community apartment.

Under one set of bankruptcy exemptions (system 2 and the one you would normally choose if you own a home in which there is a lot of equity), the amount of equity that is protected is:

$75,000.00 if single and not disabled
$100,000.00 for families if no other member has a homestead
$150,000 if age 65 or older or physically or mentally disabled
$100,000 if 55 or older, single and earn under $15,000 or married and earn under $20,000.

Another set of bankruptcy exemptions (system 1) in California provides for only $20,725 and these may be the exemptions that you choose if you do not own a home or have very little equity in one. Under this set of bankruptcy exemptions, the unused portion may be used to exempt or protect any real property.

For example, if you only have 5K equity in your home, you could use the remaining $15,725 to cover the property of your choice. If you do not own a home, you can use the entire $20,725 to cover the property of your choice.

I chose system one which was a no brainer since I did not own a home. This allowed me to protect some additional stocks, bank accounts, cash and jewelry.

As always, please consult with a qualified bankruptcy attorney before making any decisions as to which bankruptcy home exemption to use as you may have circumstances unique to your case. I am not a lawyer.

Friday, May 27, 2011

Learn what I did about choosing a bankruptcy lawyer here, or skip ahead to find out about Bankruptcy and Paypal.
Wanna know what happens to your PayPal account when you file bankruptcy? I did and it was one of the few pieces of bankruptcy information that I couldn't find prior to filing.

I was very concerned about my PayPal account when I filed bankruptcy because I'd been selling on eBay for years and needed to be able to continue using my PayPal account or I wasn't going to have any money at all coming in. I also had PayPal Buyer Credit (not sure that still exists) through GE Money Bank.

I paid off the PayPal Buyer Credit account prior to filing because I didn't want it to harm the regular PayPal account. I also kinda wanted to keep my PayPal buyer credit. My bankruptcy attorney said I didn't need to but I was paranoid. Since the balance was under 600.00, this was not a preferential payment. However, paying that bill was like throwing that money down the drain since all my debts were discharged and GE Money Bank closed my PayPal Buyer Credit Account anyway.

In fact, they also added themselves to my creditor matrix (yes, even though I owed them nothing at this point) and this ended up delaying my bankruptcy discharge. I called them when they did this and tried to straighten it out but they wouldn't talk to me because of the automatic stay...I tried telling them that YES, they could talk to me because I did not owe them anything but it fell on deaf ears.

They said to have my lawyer call them but I didn't. (I should have but when you're in the middle of bankruptcy, things get overwhelming and sometimes you just don't want to deal with stuff, even though you should) Eventually someone at GE Money Bank figured out their mistake and they withdrew themselves from my bankruptcy. My discharge followed.

Anyway, I am happy to report that nothing happened to my PayPal account or my PayPal debit card. PayPal is actually a money transfer service, not a bank account.

Also worth mentioning is that the bankruptcy trustee never asked to see any PayPal statements or documentation, but I suppose he could have, so be ready to share that information if requested to do so. As long as you are doing everything on the up and up, you should have nothing to worry about.

And, as always, consult with a bankruptcy attorney to determine what needs to be done in your own, unique bankruptcy.

Wednesday, May 25, 2011

Every once in a while I like to post articles which show other people's perspectives. This one is from a Charleston bankruptcy lawyer and I think it's a good read but you need to read the whole thing in order to get the true tone.

It sounds harsh at first but it's really not. The bankruptcy lawyer illustrates the work that you need to put into your own bankruptcy to have a successful outcome and I think it's important for people to realize that they will need to be involved in the process to ensure that success. The original article can be found here.

Filing bankruptcy requires some work. Sure, you expect the bankruptcy lawyer to work, but there’s also some work that the client must do.

The straight scoop

If you take time to get to know me, you’ll discover that I’m, well, blunt. As subtle as a Toby Keith song, I like to say. I speak plainly, and I say what I mean. I can take a very complicated concept and break it down so that a six-year-old can understand it.

Most people appreciate that. We live in a world full of spin–a polite way of putting it. And since I keep my blog G-rated, I won’t give it any other names. But I view the attorney-client relationship as important. And in any important relationship, there must be communication and honesty. So here goes.

My Clients: “Bless their hearts”

One of the things I love about the South is that before you say something negative about someone, if you preface it with “bless her heart” or “bless his heart,” then it’s okay to just tell it like it is. (“Bless her heart, but she’s just nothing but a tramp.”) I don’t know who thought of this, but it was brilliant.

Well, bless their hearts, but some of my clients are just whiners. Don’t get upset with me now; I said “bless their hearts!”

I love the vast majority of my bankruptcy clients. I feel bad for them. I genuinely like them. I want to help them. Sometimes, I have to fight back the tears when they tell me what they’ve been going through. I feel their pain. I’ve had financial problems and known the stress. (I wrote about it in the post, “Bankruptcy Fears: Nothing to Fear But Fear Itself.”)

But when it comes to getting me what I need to file their cases, you’d think I’m asking some of them for a kidney.

We’ve been over this before

Filing bankruptcy under our new and messed up Bankruptcy Code is maddening at times. The Code requires a lot of work on things it really shouldn’t and which don’t lead to useful information–like the means test form, which I refer to as “the colon of the Bankruptcy Code” because of what it produces. Lots and lots of work and number crunching is involved in that *&*# form, and it just doesn’t yield any useful information. I’m with you on this; it’s frustrating.

To be successful with your bankruptcy, we must get a bit obsessed with documents and information about your finances. I explained all this in “Bankruptcy Documents: It’s a Moving Target” and “Bankruptcy Documents–”Turn the Page.” I also go through the process in great detail in my bankruptcy guide.

But it’s really not that bad

But it’s not that bad. Sure, I’ll need two years tax returns, six month’s pay stubs (plus any received right up until you file bankruptcy), and six months bank statements, just to name a few things.

Think of it this way, though. Say I charge $2,000 as an attorney fee to file a particular bankruptcy. You say, “that’s a good fee.” But wait a second. What if my hypothetical bankruptcy client has $75,000 of debt he’ll be discharging and it takes him 15 hours of work to get through the process (meetings with me, getting documents, filling out forms, going to court, emailing me, making phone calls )? THAT’S $5000 PER HOUR tax free! Not too shabby. That’s way more than I make per hour, more than any bankruptcy judge earns per hour, and more than your trustee or the U.S. Trustee earns per hour. And many clients have significantly more than $75,000 in debt–some $500,000 and some over $1,000,000. You do the math.
It’s all in your perspective

The key is the big picture. Sure, the Code’s a mess. Some of the requirements are odd and illogical, but keep the benefits in mind. $5000 per hour (or $10,000 or $50,000?) isn’t bad–especially when it’s tax free!

So understand that yes, I’m sympathetic. I know you feel ashamed, scared, humiliated. But keep in mind that bankruptcy is a “gift from the federal government” as one of my friends calls it. Don’t take out your frustrations on me or my staff–especially not my staff. Congress didn’t ask me about how to draft the Bankruptcy Code. (They didn’t even ask the bankruptcy judges!) I’m just playing the cards we’ve been dealt.

Always remember this: You’ll get more of a benefit from the bankruptcy system than anyone else will. So act like it and quit whining!

Postscript: The overwhelming majority of my clients are cooperative and get me the information and documents I need to file their cases. This post is directed at the small minority of clients–you know who you are–who expect the benefits of bankruptcy without putting effort into their cases. It just doesn’t work that way, and I hope you appreciate being told the truth about your responsibilities.

So there you have it. The "straight scoop", as he calls it, from an experienced bankruptcy lawyer. Be prepared to do a little work and you will get your fresh start.

Monday, May 23, 2011

In the present recession, there is a drastic rise in the number of people confronting debt problems. People are discovering themselves up to their necks in debt. A minority of people are able to remove their encumbrances by taking advantage of debt relief programs like debt settlement services. Others are devastated and are left with only the resort of bankruptcy.

This last group should be aware of the requirements of filing bankruptcy before actually filing. At one time, every debtor in the USA had the right to file for bankruptcy under chapter 7. But since the bankruptcy laws changed in 2005, it has become more difficult for every debtor to qualify for filing a chapter 7 bankruptcy. They now need to meet certain criteria for filing a bankruptcy under chapter 7.

Below are some of the important considerations for filing bankruptcy:

1. Filing for Chapter 7 bankruptcy is not an easy task, but it is achievable. The bankruptcy court will require you to pass a Means Test (bankruptcy form 22A. This will decide whether you are eligible for a chapter 7 bankruptcy. Your monthly income level is measured against the median of your state and your allowable expenses are also taken into account. You may or may or may not be able to file for a chapter 7 bankruptcy, where all debts are discharged. If you do not meet the criteria for filing a chapter 7, you may have to file a chapter 13.

2. Filing bankruptcy under chapter 13 does not require a means test to ascertain your monthly income. If it is determined that you can pay back some or all of your debts over a period of time, you will be put on a payment plan of no longer than five years. However, it also depends on the amount and type of debt that you owe.

3. When you file for bankruptcy, you must abide by all the terms and conditions related to it in order to get the bankruptcy discharge. You need to abide by all federal, state, and local rules and regulations or your case could be dismissed.

All required forms need to be filed correctly and in the right jurisdiction. This is why it really is critical to consult with a bankruptcy attorney when filing for bankruptcy.

Good luck to all.

This article was guest authored by Anya Bennett, and edited by epiphany.

Thursday, April 21, 2011

After my bankruptcy, funds are still tight. So when my cat got very sick, I wasn't sure exactly what I was going to do. Fortunately while doing some research, I learned about GEMB Care Credit.

There are a lot of nasty reviews out there for GE Care Credit but I could not be more grateful to them. Those nasty reviews are from people who didn't bother to read what they were signing up for.

GEMB is GE Money Bank and GEMB Care Credit is a health care credit card for you and/or your pet. You can go to any health care provider or vet that accepts this credit.

There is no interest on the credit that you get from GE Care Credit as long as you pay it off during the promotional period. The promotional period will depend on the amount of credit needed. Generally, the more credit you need, the longer time you will have to pay it off.

But miss a payment, or pay late and interest will kick in. I think this is what so many people don't understand. If you are a care credit cardholder you can pay the bill online, but make sure you pay it by 5pm eastern time on the day it is due (that's 2pm for me) or your payment will be considered late and you will be charged a late fee.

So read the fine print if you sign up for GE Care Credit. As long as you understand the rules, and are able to pay on time, you should have no problem.

The one drawback for me was only having a handful of vets to choose from but as far as I am concerned, the pet care credit was a lifesaver. I'm still paying it and if I don't get it paid off in the promotional period, and have to pay interest, it will still be worth it. My cat got the care she needed.

Wednesday, April 20, 2011

THE DEFINITION OF CREDITOR ~ SECURED CREDITORS AND UNSECURED CREDITORS. If you are going to file bankruptcy, you need to know the difference.

I was asked by someone the other day to explain the difference between secured and unsecured creditors so I thought I would answer it here too in case anyone has the same questions.

First of all, in case you haven't heard the word, the definition of a debtor is simply a person who is in debt or under financial obligation to another person or company. If you are filing for bankruptcy, the debtor is you.

The definition of a secured creditor(s) is a lender, individual or otherwise, who holds a legally enforceable claim to a debtor's asset. Examples of this would be a mortgage, lien, or other collateral.

Secured creditors may legally seize or repossess property when loans are in default. In bankruptcy, secured creditor debts must be satisfied before any unsecured creditors.

The definition of an unsecured creditor(s) is a lender who extended credit to a debtor without any collateral. In bankruptcy, unsecured creditors are paid only after secured creditors are satisfied. Unsecured creditors are often not paid anything if the debtor qualifies to have all debts discharged in a chapter 7 bankruptcy.

Because there is no collateral required, unsecured debt usually carries with it a higher interest rate. However, in the first years following bankruptcy, it may be tough to qualify for any type of unsecured credit. Successful Filers often opt to get a secured credit card, also known as a bank secured card.

A secured credit card usually requires a deposit that will be matched by a line of credit. Many filers use these bank secured cards to help them re-establish credit after bankruptcy.

So there you have the definition of a creditor and then some. As always, consult with your attorney about your particular situation.

Saturday, April 16, 2011

One of the most frightening aspects of my chapter 7 bankruptcy was the thought of attending the bankruptcy trustee meeting, officially known as the 341 Meeting Of Creditors. In retrospect, I needn't have been frightened at all.

The 341 creditors meeting is a hearing that you are required to attend between you, the bankruptcy trustee and your creditors. That's the technical definition anyway. The truth is that most of the time in chapter 7 bankruptcies,
the creditors don't even show up.

The reason for this is that creditors are often wasting both time and money to attend a creditors meeting. They know that most people who file a chapter 7 are going to be receiving a discharge no matter what. However, if they have solid grounds to object, say they can prove that you committed bankruptcy fraud, then they may very well show up. But as it was explained to me by my lawyer, it's pretty rare that they do. If a creditor can't make a bankruptcy claim, why bother?

My bankruptcy meeting of creditors went like this:

The 341 was scheduled for 2:30 in the afternoon. I arrived an hour and a half early because you just can't count on L.A. traffic to be light at any time of day, especially going into downtown. I didn't dare chance being late and having my hearing postponed.

I sat around in the waiting room for a while listening to lawyers talk and a little before 1:30, I noticed the lawyer I was supposed to meet (my lawyer sent someone else) talking to his 1:30 session people. When he was done, I introduced myself and asked him if I could go wander around. He told me to go shopping for a while, so I did some WINDOW shopping and came back about 20 minutes later. I started clocking the rate at which people were exiting the courtroom and it was averaging 4-6 minutes each. I thought that was a good sign.

The lawyer got together with me a few minutes before the 2:30 session and then all the 2:30 people went into the hearing room. He told me I was number 3 on the docket.

The trustee addressed the room and told everyone to have their driver's licenses and social security cards out so they wouldn't be fumbling for them up at the table, and warned everyone that they would be under oath. He also told everyone to turn off cell phones or anything else that would make noise and that there was to be no talking. Violators of these rules, he said, would be asked to leave and come back in a month and a half.

He called the first person and then also called my name and told me to wait against the wall. (seems debtor 2 had not shown up). Just as he was about to begin with her he had to admonish the audience because there were some people talking. Idiots. He reminded them that they could very easily be asked to leave.

The trustee spent about five minutes with debtor number one and joked with her a couple of times. Her husband was in the front row and he told her that he could see her husband shaking his head to what she was saying and told him: "it's okay sir, you are not under oath". He excused her and then it was my turn. Below is how it went:

Trustee: Please state your name.

Me: Epiphany Poo

Trustee: Please state your address:

Me: Epiphany Poo Lane, EpiphanyLand, USA

Trustee: Did you read the pamplet that you were given?

Me: Yes
Trustee: Did you read your bankruptcy petition?

Me: Yes
Trustee: Did you sign the petition yourself?

Me: Yes

Trustee: Are these your tax returns?

Me: Yes

Trustee: Is everything in your tax returns true and correct?

Me: Yes

Trustee: What is "insert name of my business"?

Me: A small part time online business.

Trustee: Are all the assets from the business listed in your petition?

Me: Yes

Trustee to lawyer: I have no further interest in these (he handed the tax returns to him).
Trustee to room: Are there any creditors here for this matter?

Room: Sweet Silence.

Trustee: You are excused. Good Luck to you.

Me: Thank you.

Then the lawyer handed me a copy of my case and my tax returns and wished me luck too. I thanked him and was on my merry way.

Whole thing took less than three minutes. Easy. And a relief. Was home at 3:12. Poured a glass of wine and had steak for dinner (it's okay, it was on sale).

My experience may not be your experience (a chapter 13 341 meeting is no doubt more complicated) but I have talked to a lot of people who filed a chapter 7 and have similar stories.

341 meetings are public, and if you like you can attend some of these ahead of time to get a feel for what they are like. And, as always, consult with your attorney, who will be able to tell you what you need to bring to the bankruptcy 341 based on your particular circumstances.

May your bankruptcy trustee meeting go as smoothly as mine did and may none of your creditors show up!

Wednesday, April 13, 2011

If you are contemplating bankruptcy, you are probably already broke. If you are already broke, you are probably wondering how in the world you are going to pay for bankruptcy.

Bankruptcy Attorney fees vary so the cost of bankruptcy will vary. You are going to need to shop around to determine what reasonable fees in your area are. I paid 1000.00 for the attorney that handled my chapter 7 bankruptcy case but you may not find one that low in your area.

It was also made clear that there would be additional fees if my lawyer was required to fight any creditors that made a stink. That didn't happen. Fortunately, in a simple chapter 7 case, it rarely does.

Other costs in my chapter 7 bankruptcy includde a 299.00 court filing fee(the fee in a chapter 13 is 274.00) and the cost of two online credit counseling sessions. Those were about 70.00. Then there was one last fee of 12.00 to cover parking at the 341 meeting of the creditors. My total cost: 1381.00.

I was very broke at the time I needed to file and, like maybe you are now, I was extremely worried about how I was going to afford it. The good news is that bankruptcy attorneys understand this predicament and many (most I think) will arrange a payment plan with you but they won't actually do the filing until you are all paid up.

More good news is that many attorneys offer free bankruptcy consultations and they will probably tell you to stop paying all of your secured debts (like credit cards) immediately. (I am not advising you to stop paying any creditors--I am not an attorney).

I had already stopped paying most of my creditors due to inability and the decision to file and that freed up the cash to pay my lawyer, though it did take me several months.

No matter the cost, bankruptcy can give you the fresh start that you need. It's a heavy decision to make but the cost of bankruptcy should not be a factor when making it.

Saturday, April 2, 2011

A lot of people who file for bankruptcy wonder about bankruptcy and fraud--specifically whether or not anything they have done might constitute bankruptcy fraud. It is an important consideration and the reason why filing bankruptcy sometimes takes planning.

What constitutes bankruptcy fraud? Bankruptcy fraud could include anything that has been done to dishonestly manipulate the outcome of a bankruptcy, which is why you absolutely need to talk to a bankruptcy attorney about bankruptcy and fraud as it relates to your circumstances in order to avoid bankruptcy fraud penalties.

That said, below are some of the most common things that can be considered bankruptcy fraud.

Concealment of Assets
Concealment of assets may include selling off, transferring, or hiding assets prior to filing. This may include assets you are expecting (i.e. a tax return). Ask your attorney what assets count here. Typically, your old couch or the clothes in your closet are not worth anything so you want to understand exactly what your assets are.

Using Credit Immediately Before Filing
Using your credit cards, for purchases or cash advances, or obtaining new credit too close to filing bankruptcy can raise huge, flashing, red flags. (Goods and services deemed necessary for living may be exempt) If you have used your credit too recently, it could be argued by your creditors that you knew you were going to file bankruptcy when you used or obtained that credit. Seek the advice of your bankruptcy attorney if this applies to you. You may be advised to wait some time before filing.

Providing False Information On Credit Applications
Providing false information to obtain credit is illegal, and we all know that many people "pad" their income some on credit applications. I do not condone that or claim that it won't be a problem for you, but my lawyer told me that the creditors have a certain responsibility to verify the information that they are provided. Speak to your attorney if you are worried about this.

There are other types of bankruptcy fraud but those are the ones most commonly worried about by filers. The bottom line is that once you know that you are going to be filing bankruptcy, you should not do anything that might jeopardize the successful discharge of your case, or worse, cause you to suffer any bankruptcy fraud penalties.

Bankruptcy Fraud Penalties
Punishment in bankruptcy fraud cases is up to five years in prison and $250,000 in fines. So not worth it.

I know I say it a lot, and I've said it a number of times in this post alone, but it is especially important for the topic of bankruptcy and fraud. If you have concerns, you need to discuss them with your bankruptcy attorney. I am not a lawyer and nothing I say is intended to be legal advice.

Tuesday, March 8, 2011

Since a chapter 7 bankruptcy is a liquidation of assets (though I've said before that in many cases, there is nothing to liquidate so no need to panic), part of our bankruptcy code includes rules for preferential payments. It is imperative to understand what preferential payments in bankruptcy are as well as several simple rules that govern them.

For bankruptcy, preferential payments are debt payments made to a creditor prior to filing a chapter 7 bankruptcy that gives one creditor more than they would receive in your chapter 7 bankruptcy while other creditors get less (or nothing). The preference period is the 90 days prior to filing for most creditors.

You may want to pay off one creditor prior to filing in hopes of retaining that account after the discharge. (Most creditors will close your account anyway after you file, even if you owe them nothing, so trying to keep an account alive is usually futile.)

For example, you pay off creditor X right before filing but pay nothing to Creditor Y. You have given creditor X a preferential payment and the court could demand that creditor X return those funds to the bankruptcy estate so that they can be equally divided amongst all creditors.

The preference period goes back an entire year if the payee is an insider. Insiders are friends, family members, etc.

You may understandably want to pay off a friend of family member that you owe money to prior to filing so that you don't have to include them in your bankruptcy. But, just like in the case of regular creditors, the trustee can go after any preferential transfers made to insiders. And, as I already stated, because the payee is an insider, any preferential payments going back an entire year can be seized.

Friday, March 4, 2011

When someone asks me "How Do I Go Bankrupt?", I tell them that it will depend on their own unique situation and what bankruptcy chapter they qualify for.

I firmly believe, and keep repeating, that you should seek the advice of a bankruptcy attorney if you are going to file bankruptcy. That said, while I can't tell you exactly how to go bankrupt because I don't know your situation and I am not a lawyer, I can tell you the bankruptcy steps that I took to receive a discharge in the chapter 7 that I filed.

I met with a number of bankruptcy attorneys and hired the one I was most comfortable with. My attorney let me pay him off over time. For tips on hiring a good attorney, read my bankruptcy attorney tips.

I gathered the paperwork that my attorney told me to gather (your attorney may require additional documents). These were my last two tax returns, the last six months of pay stubs, and I filled out a creditor matrix. The creditor matrix includes all companies, or persons that you owe money to, including addresses, balances, and account numbers. Collection agencies also needed to be included.

I took the mandatory pre-filing credit counseling course. I took this online and it took about two hours and cost about 35.00. I was able to print the certificate needed for filing on my own printer at home.

I submitted all the necessary paperwork and my lawyer filed my bankruptcy. The automatic stay went into effect and my creditors were barred from contacting me in any way about the debts.

I attended the 341 Meeting of the Creditors that was scheduled for about a month after the filing (this is scarier than it sounds for most people. Creditors rarely show up for a chapter 7 bankruptcy hearing and mine was no different).

I took the mandatory post filing bankruptcy course and sent the certificate to my attorney for filing. This course took about an hour online and cost around 35.00.

I waited. I waited longer than most people because the Los Angeles courts are usually backed up. Most people who file a chapter 7 and have no complications receive their discharge about 60 days after the 341.

I received my discharge. That was two years ago. Since then I live mostly a cash and carry lifestyle and much prefer it. I will never take peace of mind for granted again.

Those are the bankruptcy steps that I took. If you find yourself asking "How Do I Go Bankrupt?", remember that your bankruptcy steps may vary and see my tips for selecting a great bankruptcy attorney.

Monday, February 28, 2011

We hear about famous bankruptcies all the time. I mean, everyone knows that Donald Trump has filed bankruptcy multiple times. And we always hear about celebrities like Willie Nelson or Kim Basinger filing bankruptcy. We hear about the Teresa Giudice bankruptcy and how Eva Longoria just filed a business bankruptcy of her restaurant. Toni Braxton has filed for bankruptcy due to illness. Edit: Teresa Guidice, one of the real housewives, has also filed with her husband.

But the last president's day got me thinking. I wondered if any presidents have ever filed for bankruptcy.

So have any presidents filed for bankruptcy? ---I really expected the answer to be a big, fat no, but I did some poking around and was really surprised by what I found.

The following presidents have all had a bankruptcy--

Thomas Jefferson (twice), Ulysses S. Grant, William McKinnley and Abraham Lincoln have all taken advantage of bankruptcy protection!

I wish I had had this information when I filed for bankruptcy. I might have felt a bit better of it knowing that a founding father and Honest Abe were once in the same bankruptcy boat as me. After all, misery does love company, and that's pretty good company for misery to love!

Monday, February 14, 2011

Learn what I did about choosing a bankruptcy lawyer here, or skip ahead to find out about Bankruptcy and Paypal.
Are you worried about what will happen to your bank account during bankruptcy? I was. It was a major concern of mine before I filed so I thought that you too might like to know about bank accounts and bankruptcy.

My personal bank accounts were with my employer's credit union. My checking account was overdrawn due to overdraft fees and I had two delinquent personal loans with this financial institution as well. I hadn't been able to make payments on the loans for several months.

The loans were going to be included in my bankruptcy petition but I wanted to bring my checking account current so I could continue to use it...I was attached to my credit union despite the threatening letters I had been receiving regarding my overdue loans. My attorney told me not to bother.

He said that the checking account could also be included in the bankruptcy and it was possible that the bank could use something called cross-collateralization, to freeze the bank account. That meant that they could essentially freeze direct deposit funds from my employer, leaving me nothing to live on.

An example of cross-collateralization is when a debtor has a checking account and a loan at the same bank. The debtor becomes past due on the loan and then the financial institution takes money out of the bank account or freezes the account until the loan becomes current.

The practice of freezing bank accounts due to past due loans is most commonly used by credit unions but other banks can do it. Going one step further, it is currently being reported that Wells Fargo/Wacovia is freezing the bank accounts of individuals who file bankruptcy, even if they don't have any debt with them and despite a court order deeming the practice illegal. That's scary stuff.

My bankruptcy attorney suggested changing bank accounts before the bankruptcy petition was filed, I wasn't able to close the accounts because of the negative balance but I did immediately stop my direct deposits and I opened new bank accounts at a local bank to whom I owed nothing. I could have also opened an online bank account. I know people who have successfully opened a bank account online for the same reason.

Had I not opened a new bank account prior to filing bankruptcy, it would have been very difficult to do so. Traditional banks do not check your credit report, but often they do use something called ChexSystems (or Chex Systems) or a similar company to check your banking history.

If you have outstanding (unpaid for) checks or an overdrawn checking account that has not been resolved, your bank will probably report you to ChexSystems and ChexSystems will report that information to banks that request it for up to five years.

So what do you do if you didn't open up a new account before bankruptcy? Is there a "bankruptcy bank" or are there "bank accounts for bankrupts" out there? Yes. There are second chance bank accounts. Second chance checking accounts, also known as Fresh Start bank accounts, can often be found online.

Don't be afraid of banking online. More and more people are banking on line (regardless of whether or not they have filed bankruptcy). Online bank accounts are sometimes easier to get and online banking is safer than it ever has been. You just need to remember to never sign into your account from an email.

That's the skinny on bank accounts and bankruptcy. As always, I wish you all success with your fresh start!

Tuesday, February 8, 2011

I was asked to write about the automatic stay in bankruptcy so this is a special request post.

If you are anything like I was you may be having a hard time before the bankruptcy with the harassing creditor calls. I didn't get much peace for nearly a year. The calls literally made me sick to my stomach and I eventually stopped answering the phone altogether.

That didn't stop it from ringing though and it made me flinch every time it did. It was a job in and of itself just to check my voice mail for the 10 percent of calls that I actually wanted to answer.

For this reason alone, once I made the decision to file, I couldn't wait to actually do it. It would take me a while to pay off the lawyer so he could file but I knew that once I filed the bankruptcy automatic stay would go into effect and my creditors would have to leave me alone.

In bankruptcy law, the automatic stay is an automatic injunction that halts actions by creditors to collect debts from a debtor who has declared bankruptcy...this means they cannot contact you about your debt through any medium for any reason! The automatic stay goes into effect the moment your bankruptcy petition is filed. This is the moment you begin to wipe the sweat from your entire body.

Talk to your attorney about your situation though because there are some exceptions. Secured creditors (creditors that have collateral backing the loan such as a car or house) can petition the court for relief from the automatic stay and it can be granted if they can show cause. Cause usually means that they have to show that there was some type of fraud committed.

When the debtor gets a discharge, the automatic stay is replaced by a permanent injunction prohibiting creditors from ever attempting to collect on those discharged debts. The permanent injunction does not apply to any debts acquired after the date of filing.

I hope this post satisfies the person that requested it. I'm gonna have a lot more to say about creditor harassment in the future but if you have any more questions about the automatic stay in bankruptcy, please let me know. I know there is much to cover.

Sunday, February 6, 2011

Some people grow a little concerned when they hear that they have to complete bankruptcy credit counseling courses in order to receive a discharge. Be aware of this but don't sweat it.

In a Chapter 13, the Trustee will offer the required courses but Chapter 7 debtors are to take the courses on their own. There are two different credit counseling courses that debtors must take. In a Chapter 7 bankruptcy there is a pre-filing class that must be taken within the six months prior to filing and a debtor education course that must be taken after the 341 hearing but before the discharge.

When you pass the pre-filing course, you are issued a certificate that gets filed with your case. The debtor education certificate will also be filed with the court after you pass that class.

These classes can be taken online and I found them pretty easy. If memory serves, the pre-filing bankruptcy credit counseling course took about two hours and the second one was less that that. The bankruptcy courses that I took cost between 35 and 50 dollars at that time.

One thing you must do is make sure that the classes you take are from a debtor education company that is government approved for your state, otherwise it won't count.

I used Springboard here in California and was pretty happy with it. I think they gave me 20 dollars off on the second course after I took the first one. Your bankruptcy attorney should be able to give you a recommend a good qualifying credit counseling agency.

Here is a link to the government approved companies providing debtor education by state (from the government web site):

Monday, January 31, 2011

I need to take a little detour here and talk about payday loans. If you have a steady job, a payday loan can get you through a short term money crunch, but there are a few things that you need to be aware of.

A payday loan is expensive. The interest on payday loans is quite high and the amount of time you have to pay it back is short, usually 18 days or less. Payday loan companies will determine the pay back date by the date your are to receive your next paycheck.

The amount you will be able to borrow will depend on your state. In some states you can borrow as much as 1500.00 until your next paycheck but in California there are laws which prohibit payday loan companies from lending you more than 300.00 at a time.

If you do decide to take out a pay advance, make sure you are dealing with a licensed (in your state) payday loan company. It is easy enough to verify online. There are some predatory out of state companies who do not have legal license to do business in your state that will lend you money and require an outrageous payback.

Desperate people sometimes agree to outrageous terms but the truth is that these unlicensed loans are illegal. Pay back the principal but they have no legal legs to collect more than that.

You don't have to trust me on this (always verify everything you read on the internet) but know that I tend to learn things the hard way.

Friday, January 28, 2011

This is just going to be a short post because I just read something about debt settlement and this thought floated to the top of my head.

Did you know that whether you use a debt settlement company or settle debt on your own with your creditors, you may have to pay tax on any amount that is forgiven? Your creditors are required to supply the IRS with a 1099 if the forgiven amount is 600.00 or greater.

Reputable debt settlement companies will tell you this but others may not or they may totally play it down.

Creditors definitely won't tell you this so you need to be aware of it when weighing your financial options.

Thursday, January 27, 2011

A chapter 7 bankruptcy trustee reviews your chapter 7 bankruptcy, making sure everything is in order, and liquidates the eligible assets of your estate. But, as I have stated before, the liquidation of assets is not that common so don't freak out. This bankruptcy trustee also presides over the 341 hearing (meeting of the creditors--more about that later).

If you have a simple chapter "no-asset" case, you won't have much dealings with the bankruptcy trustee. I saw mine only at the 341 hearing and he asked me questions for less than five minutes.

A chapter 13 bankruptcy will review your chapter 13 bankruptcy, and determine a payment plan for you, ensuring that you will be able to meet your obligations under the plan. He will oversee this payment plan for it's duration.

It sounds intimidating but really, if your bankruptcy is on the up and up, you shouldn't have to worry about the bankruptcy trustee. Bankruptcy is not as scary as you've been led to believe.

Monday, January 17, 2011

At the risk of slitting my virtual throat, I proceed with the following rant because it's the right thing to do. I am sickened by the quality of bankruptcy advice that is available...or unavailable...on the internet.

This is a post of passion. I spent the better part of today reading blog posts and other articles about bankruptcy on the internet. And what I found was so much misinformation about bankruptcy that I find myself needing to caution my readers about believing everything that they read on the web.

I am embarrassed to say that it actually took me running across one great blog post with very accurate bankruptcy information to inspire this diatribe. The post was such an anomaly to my day that it made me think HEY WAIT! I need to warn my readers to not believe everything they read. There were some truths in many articles that I read today but those same articles also contained many untruths.

I post only accurate bankruptcy information (if I don't know it, I don't post it) on my blog but I will never blame you for verifying anything I have to say! In fact, I encourage you to. I am not an attorney. I am a discharged bankruptcy filer who did a lot of homework during my bankruptcy.

So please talk to a bankruptcy attorney or do enough homework to know what you're doing if you file pro se.

Sunday, January 16, 2011

For those of you who want to know how much property you can keep in a chapter 7 bankruptcy, I have listed below the actual code with the current California bankruptcy exemption amounts.

California bankruptcy exemption amounts get adjusted every three years and the last adjustment was on April 1st, 2010. These amounts are valid in the years 2011, 2012 and until another adjustment will made in the year 2013.

California does not allow a debtor to use Federal bankruptcy exemptions but I will list them in another post soon for filers from other states.

California is the only state that has two sets of state exemptions for a debtor to choose from. It is not possible to choose some options from system 1 and some options from system 2. You must choose one or the other. Obviously, which exemption system you choose will depend on your situation and you should discuss that with your bankruptcy attorney. I am not a lawyer and it is up to you to verify anything that you read on the internet, including here, though I do believe this information to be correct.

California System 2 exemptions are similar to those of other states. There is a large homestead exemption which is advantageous to filers who own homes.

System 1 is similar to the federal bankruptcy exemptions. It includes what is known as the wild card. The wild card exemption allows people who do not own a home to use the value of the homestead exemption for any property you choose.

Okay, here's the code below with the updated California bankruptcy exemption amounts valid for year 2011 and 2012 too. These amounts will be updated in 2013.

� 703.140. Election of exemptions if bankruptcy petition is filed

System 2

(a) In a case under Title 11 of the United States Code, all of the exemptions provided by this chapter, including the homestead exemption, other than the provisions of subdivision (b) are applicable regardless of whether there is a money judgment against the debtor or whether a money judgment is being enforced by execution sale or any other procedure, but the exemptions provided by subdivision (b) may be elected in lieu of all other exemptions provided by this chapter, as follows:

(1) If a husband and wife are joined in the petition, they jointly may elect to utilize the applicable exemption provisions of this chapter other than the provisions of subdivision (b), or to utilize the applicable exemptions set forth in subdivision (b), but not both.

(2) If the petition is filed individually, and not jointly, for a husband or a wife, the exemptions provided by this chapter other than the provisions of subdivision (b) are applicable, except that, if both the husband and the wife effectively waive in writing the right to claim, during the period the case commenced by filing the petition is pending, the exemptions provided by the applicable exemption provisions of this chapter, other than subdivision (b), in any case commenced by filing a petition for either of them under Title 11 of the United States Code, then they may elect to instead utilize the applicable exemptions set forth in subdivision (b).

(3) If the petition is filed for an unmarried person, that person may elect to utilize the applicable exemption provisions of this chapter other than subdivision (b), or to utilize the applicable exemptions set forth in subdivision (b), but not both.

(b) The following exemptions may be elected as provided in subdivision (a):

(1) The debtor's aggregate interest, not to exceed ($22,075) in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.

(2) The debtor's interest, not to exceed ($3,525) in value, in one motor vehicle.

(3) The debtor's interest, not to exceed ($550) in value in any particular item, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(4) The debtor's aggregate interest, not to exceed ($1,425) in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(5) The debtor's aggregate interest, not to exceed in value ($1175) plus any unused amount of the exemption provided under paragraph (1), in any property.

(6) The debtor's aggregate interest, not to exceed ($2,200) in value, in any implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor.

(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.

(8) The debtor's aggregate interest, not to exceed in value ($11,800), in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.

(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.

(10) The debtor's right to receive any of the following:

(A) A social security benefit, unemployment compensation, or a local public assistance benefit.

(B) A veterans' benefit.

(C) A disability, illness, or unemployment benefit.

(D) Alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

(E) A payment under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless all of the following apply:

(i) That plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor's rights under the plan or contract arose.

(ii) The payment is on account of age or length of service.

(iii) That plan or contract does not qualify under Section 401(a), 403(a), 403(b),408, or 408A of the Internal Revenue Code of 1986.

(11) The debtor's right to receive, or property that is traceable to, any of the following:

(A) An award under a crime victim's reparation law.

(B) A payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

(C) A payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of that individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

(D) A payment, not to exceed ($22,075), on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent.

(E) A payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

System 1

704.010. (a) Any combination of the following is exempt in the amount of ($2,725): (1) The aggregate equity in motor vehicles. (2) The proceeds of an execution sale of a motor vehicle. (3) The proceeds of insurance or other indemnification for the loss, damage, or destruction of a motor vehicle.

(b) Proceeds exempt under subdivision (a) are exempt for a period of 90 days after the time the proceeds are actually received by the judgment debtor.

(c) For the purpose of determining the equity, the fair market value of a motor vehicle shall be determined by reference to used car price guides customarily used by California automobile dealers unless the motor vehicle is not listed in such price guides.

(d) If the judgment debtor has only one motor vehicle and it is sold at an execution sale, the proceeds of the execution sale are exempt in the amount of ($2,725) without making a claim. The levying officer shall consult and may rely upon the records of the Department of Motor Vehicles in determining whether the judgment debtor has only one motor vehicle. In the case covered by this subdivision, the exemption provided by subdivision (a) is not available.

704.020. (a) Household furnishings, appliances, provisions, wearing apparel, and other personal effects are exempt in the following cases: (1) If ordinarily and reasonably necessary to, and personally used or procured for use by, the judgment debtor and members of the judgment debtor's family at the judgment debtor's principal place of residence. (2) Where the judgment debtor and the judgment debtor's spouse live separate and apart, if ordinarily and reasonably necessary to, and personally used or procured for use by, the spouse and members of the spouse's family at the spouse's principal place of residence. (b) In determining whether an item of property is "ordinarily and reasonably necessary" under subdivision (a), the court shall take into account both of the following: (1) The extent to which the particular type of item is ordinarily found in a household. (2) Whether the particular item has extraordinary value as compared to the value of items of the same type found in other households. (c) If an item of property for which an exemption is claimed pursuant to this section is an item of the type ordinarily found in a household but is determined not to be exempt because the item has extraordinary value as compared to the value of items of the same type found in other households, the proceeds obtained at an execution sale of the item are exempt in the amount determined by the court to be a reasonable amount sufficient to purchase a replacement of ordinary value if the court determines that a replacement is reasonably necessary. Proceeds exempt under this subdivision are exempt for a period of 90 days after the proceeds are actually received by the judgment debtor.

704.030. Material that in good faith is about to be applied to the repair or improvement of a residence is exempt if the equity in the material does not exceed ($2,875) in the following cases: (a) If purchased in good faith for use in the repair or improvement of the judgment debtor's principal place of residence. (b) Where the judgment debtor and the judgment debtor's spouse live separate and apart, if purchased in good faith for use in the repair or improvement of the spouse's principal place of residence.

704.040. Jewelry, heirlooms, and works of art are exempt to the extent that the aggregate equity therein does not exceed ($7,175).

704.050. Health aids reasonably necessary to enable the judgment debtor or the spouse or a dependent of the judgment debtor to work or sustain health, and prosthetic and orthopedic appliances, are exempt.

704.060. (a) Tools, implements, instruments, materials, uniforms, furnishings, books, equipment, one commercial motor vehicle, one vessel, and other personal property are exempt to the extent that the aggregate equity therein does not exceed: (1) ($7,175), if reasonably necessary to and actually used by the judgment debtor in the exercise of the trade, business, or profession by which the judgment debtor earns a livelihood. (2) ($6,750), if reasonably necessary to and actually used by the spouse of the judgment debtor in the exercise of the trade, business, or profession by which the spouse earns a livelihood. (3) Twice the amount of the exemption provided in paragraph (1), if reasonably necessary to and actually used by the judgment debtor and by the spouse of the judgment debtor in the exercise of the same trade, business, or profession by which both earn a livelihood. In the case covered by this paragraph, the exemptions provided in paragraphs (1) and (2) are not available. In the case covered by this paragraph, the exemptions provided in paragraphs (1) and (2) are not available.
(b) If property described in subdivision (a) is sold at an execution sale, or if it has been lost, damaged, or destroyed, the proceeds of the execution sale or of insurance or other indemnification are exempt for a period of 90 days after the proceeds are actually received by the judgment debtor or the judgment debtor' s spouse. The amount exempt under this subdivision is the amount specified in subdivision (a) that applies to the particular case less the aggregate equity of any other property to which the exemption provided by subdivision (a) for the particular case has been applied. (c) Notwithstanding subdivision (a), a motor vehicle is not exempt under subdivision (a) if there is a motor vehicle exempt under Section 704.010 which is reasonably adequate for use in the trade, business, or profession for which the exemption is claimed under this section. (d) Notwithstanding subdivisions (a) and (b): (1) The amount of the exemption for a commercial motor vehicle under paragraph (1) or (2) of subdivision (a) is limited to four thousand dollars ($4,850). (2) The amount of the exemption for a commercial motor vehicle under paragraph (3) of subdivision (a) is limited to twice the amount of the exemption provided in paragraph (1) of this subdivision.

704.070. (a) As used in this section: (1) "Earnings withholding order" means an earnings withholding order under Chapter 5 (commencing with Section 706.010) (Wage Garnishment Law). (2) "Paid earnings" means earnings as defined in Section 706.011 that were paid to the employee during the 30-day period ending on the date of the levy. For the purposes of this paragraph, where earnings that have been paid to the employee are sought to be subjected to the enforcement of a money judgment other than by a levy, the date of levy is deemed to be the date the earnings were otherwise subjected to the enforcement of the judgment. (3) "Earnings assignment order for support" means an earnings assignment order for support as defined in Section 706.011. (b) Paid earnings that can be traced into deposit accounts or in the form of cash or its equivalent as provided in Section 703.080 are exempt in the following amounts: (1) All of the paid earnings are exempt if prior to payment to the employee they were subject to an earnings withholding order or an earnings assignment order for support. (2) Seventy-five percent of the paid earnings that are levied upon or otherwise sought to be subjected to the enforcement of a money judgment are exempt if prior to payment to the employee they were not subject to an earnings withholding order or an earnings assignment order for support.

704.080. (a) For the purposes of this section: (1) "Deposit account" means a deposit account in which payments authorized by the Social Security Administration are directly deposited by the United States government. (2) "Payments authorized by the Social Security Administration" means regular retirement and survivors' benefits, supplemental security income benefits, coal miners' health benefits, and disability insurance benefits. (b) A deposit account is exempt without making a claim in the following amount: (1) ($2,875) where one depositor is the designated payee of the directly deposited payments. (2) ($4,300) where two or more depositors are the designated payees of the directly deposited payments, unless those depositors are joint payees of directly deposited payments which represent a benefit to only one of the depositors, in which case the exempt amount is two thousand dollars ($2,700). (c) The amount of a deposit account that exceeds the exemption provided in subdivision (b) is exempt to the extent that it consists of payments authorized by the Social Security Administration. (d) Notwithstanding Article 5 (commencing with Section 701.010) of Chapter 3, when a deposit account is levied upon or otherwise sought to be subjected to the enforcement of a money judgment, the financial institution that holds the deposit account shall either place the amount that exceeds the exemption provided in subdivision (b) in a suspense account or otherwise prohibit withdrawal of that amount pending notification of the failure of the judgment creditor to file the affidavit required by this section or the judicial determination of the exempt status of the amount. Within 10 business days after the levy, the financial institution shall provide the levying officer with a written notice stating (1) that the deposit account is one in which payments authorized by the Social Security Administration are directly deposited by the United States government and (2) the balance of the deposit account that exceeds the exemption provided by subdivision (b). Promptly upon receipt of the notice, the levying officer shall serve the notice on the judgment creditor. Service shall be made personally or by mail. (e) Notwithstanding the procedure prescribed in Article 2 (commencing with Section 703.510), whether there is an amount exempt under subdivision (c) shall be determined as follows: (1) Within five days after the levying officer serves the notice on the judgment creditor under subdivision (d), a judgment creditor who desires to claim that the amount is not exempt shall file with the court an affidavit alleging that the amount is not exempt and file a copy with the levying officer. The affidavit shall be in the form of the notice of opposition provided by Section 703.560, and a hearing shall be set and held, and notice given, as provided by Sections 703.570 and 703.580. For the purpose of this subdivision, the "notice of opposition to the claim of exemption" in Sections 703.570 and 703.580 means the affidavit under this subdivision. (2) If the judgment creditor does not file the affidavit with the levying officer and give notice of hearing pursuant to Section 703.570 within the time provided in paragraph (1), the levying officer shall release the deposit account and shall notify the financial institution. (3) The affidavit constitutes the pleading of the judgment creditor, subject to the power of the court to permit amendments in the interest of justice. The affidavit is deemed controverted and no counteraffidavit is required. (4) At a hearing under this subdivision, the judgment debtor has the burden of proving that the excess amount is exempt. (5) At the conclusion of the hearing, the court by order shall determine whether or not the amount of the deposit account is exempt pursuant to subdivision (c) in whole or in part and shall make an appropriate order for its prompt disposition. No findings are required in a proceeding under this subdivision. (6) Upon determining the exemption claim for the deposit account under subdivision (c), the court shall immediately transmit a certified copy of the order of the court to the financial institution and to the levying officer. If the order determines that all or part of the excess is exempt under subdivision (c), with respect to the amount of the excess which is exempt, the financial institution shall transfer the exempt excess from the suspense account or otherwise release any restrictions on its withdrawal by the judgment debtor. The transfer or release shall be effected within three business days of the receipt of the certified copy of the court order by the financial institution. (f) If the judgment debtor claims that a portion of the amount is exempt other than pursuant to subdivision (c), the claim of exemption shall be made pursuant to Article 2 (commencing with Section 703.510). If the judgment debtor also opposes the judgment creditor' s affidavit regarding an amount exempt pursuant to subdivision (c), both exemptions shall be determined at the same hearing, provided the judgment debtor has complied with Article 2 (commencing with Section 703.510).

704.090. (a) The funds of a judgment debtor confined in a prison or facility under the jurisdiction of the Department of Corrections or the Department of the Youth Authority or confined in any county or city jail, road camp, industrial farm, or other local correctional facility, held in trust for or to the credit of the judgment debtor, in an inmate's trust account or similar account by the state, county, or city, or any agency thereof, are exempt without making a claim in the amount of ($1,350). If the judgment debtor is married, each spouse is entitled to a separate exemption under this section or the spouses may combine their exemptions. (b) Notwithstanding subdivision (a), if the judgment is for a restitution fine or order imposed pursuant to subdivision (a) of Section 13967 of the Government Code, as operative on or before September 28, 1994, or Section 1203.04 of the Penal Code, as operative on or before August 2, 1995, or Section 1202.4 of the Penal Code, the funds held in trust for, or to the credit of, a judgment debtor described in subdivision (a) are exempt in the amount of three hundred dollars ($300) without making a claim.

704.100. (a) Unmatured life insurance policies (including endowment and annuity policies), but not the loan value of such policies, are exempt without making a claim. (b) The aggregate loan value of unmatured life insurance policies (including endowment and annuity policies) is subject to the enforcement of a money judgment but is exempt in the amount of ($10,775). If the judgment debtor is married, each spouse is entitled to a separate exemption under this subdivision, and the exemptions of the spouses may be combined, regardless of whether the policies belong to either or both spouses and regardless of whether the spouse of the judgment debtor is also a judgment debtor under the judgment. The exemption provided by this subdivision shall be first applied to policies other than the policy before the court and then, if the exemption is not exhausted, to the policy before the court. (c) Benefits from matured life insurance policies (including endowment and annuity policies) are exempt to the extent reasonably necessary for the support of the judgment debtor and the spouse and dependents of the judgment debtor.

704.110. (a) As used in this section: (1) "Public entity" means the state, or a city, city and county, county, or other political subdivision of the state, or a public trust, public corporation, or public board, or the governing body of any of them, but does not include the United States except where expressly so provided. (2) "Public retirement benefit" means a pension or an annuity, or a retirement, disability, death, or other benefit, paid or payable by a public retirement system. (3) "Public retirement system" means a system established pursuant to statute by a public entity for retirement, annuity, or pension purposes or payment of disability or death benefits. (b) All amounts held, controlled, or in process of distribution by a public entity derived from contributions by the public entity or by an officer or employee of the public entity for public retirement benefit purposes, and all rights and benefits accrued or accruing to any person under a public retirement system, are exempt without making a claim. (c) Notwithstanding subdivision (b), where an amount described in subdivision (b) becomes payable to a person and is sought to be applied to the satisfaction of a judgment for child, family, or spousal support against that person: (1) Except as provided in paragraphs (2) and (3), the amount is exempt only to the extent that the court determines under subdivision (c) of Section 703.070. (2) If the amount sought to be applied to the satisfaction of the judgment is payable periodically, the amount payable is subject to an earnings assignment order for support as defined in Section 706.011, or any other applicable enforcement procedure, but the amount to be withheld pursuant to the assignment order or other procedure shall not exceed the amount permitted to be withheld on an earnings withholding order for support under Section 706.052. The paying entity may deduct from the payment being made to the judgment debtor, for each payment made pursuant to an earnings assignment order under this paragraph, an amount reflecting the actual cost of administration caused by the assignment order of up to two dollars ($2) for each payment. (3) If the intercept procedure provided for in Section 11357 of the Welfare and Institutions Code is used for benefits that are payable periodically, the amount to be withheld shall not exceed the amount permitted to be withheld on an earnings withholding order for support under Section 706.052. (4) If the amount sought to be applied to the satisfaction of the judgment is payable as a lump-sum distribution, the amount payable is subject to the intercept procedure provided in Section 11357 of the Welfare and Institutions Code or any other applicable enforcement procedure. (d) All amounts received by any person, a resident of the state, as a public retirement benefit or as a return of contributions and interest thereon from the United States or a public entity or from a public retirement system are exempt.

704.113. (a) As used in this section, "vacation credits" means vacation credits accumulated by a state employee pursuant to Section 18050 of the Government Code or by any other public employee pursuant to any law for the accumulation of vacation credits applicable to the employee. (b) All vacation credits are exempt without making a claim. (c) Amounts paid periodically or as a lump sum representing vacation credits are subject to any earnings withholding order served under Chapter 5 (commencing with Section 706.010) or any earnings assignment order for support as defined in Section 706.011 and are exempt to the same extent as earnings of a judgment debtor.

704.114. (a) Notwithstanding any other provision of law, service of an earnings assignment order for support on any public entity described in Section 704.110, other than the United States government, creates a lien on all employee contributions in the amount necessary to satisfy a support judgment as determined under Section 695.210 to the extent that the judgment remains enforceable. (b) The public entity shall comply with any request for a return of employee contributions by an employee named in the order by delivering the contributions to the clerk of the court from which the order issued, unless the entity has received a certified copy of an order terminating the earnings assignment order for support. (c) Upon receipt of moneys pursuant to this section, the clerk of the court, within 10 days, shall send written notice of the fact to the parties and to the district attorney enforcing any order pursuant to Section 11475.1 of the Welfare and Institutions Code. (d) Moneys received pursuant to this section are subject to any procedure available to enforce an order for support, but if no enforcement procedure is commenced after 30 days have elapsed from the date the notice of receipt is sent, the clerk shall, upon request, return the moneys to the public entity that delivered the moneys to the court unless the public entity has informed the court in writing that the moneys shall be released to the employee. (e) A court shall not directly or indirectly condition the issuance, modification, or termination of, or condition the terms or conditions of, any order for support upon the making of a request for the return of employee contributions by an employee.

704.115. (a) As used in this section, "private retirement plan" means: (1) Private retirement plans, including, but not limited to, union retirement plans. (2) Profit-sharing plans designed and used for retirement purposes. (3) Self-employed retirement plans and individual retirement annuities or accounts provided for in the Internal Revenue Code of 1954 as amended, to the extent the amounts held in the plans, annuities, or accounts do not exceed the maximum amounts exempt from federal income taxation under that code. (b) All amounts held, controlled, or in process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan are exempt. (c) Notwithstanding subdivision (b), where an amount described in subdivision (b) becomes payable to a person and is sought to be applied to the satisfaction of a judgment for child, family, or spousal support against that person: (1) Except as provided in paragraph (2), the amount is exempt only to the extent that the court determines under subdivision (c) of Section 703.070. (2) If the amount sought to be applied to the satisfaction of the judgment is payable periodically, the amount payable is subject to an earnings assignment order for support as defined in Section 706.011 or any other applicable enforcement procedure, but the amount to be withheld pursuant to the assignment order or other procedure shall not exceed the amount permitted to be withheld on an earnings withholding order for support under Section 706.052. (d) After payment, the amounts described in subdivision (b) and all contributions and interest thereon returned to any member of a private retirement plan are exempt. (e) Notwithstanding subdivisions (b) and (d), except as provided in subdivision (f), the amounts described in paragraph (3) of subdivision (a) are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires. In determining the amount to be exempt under this subdivision, the court shall allow the judgment debtor such additional amount as is necessary to pay any federal and state income taxes payable as a result of the applying of an amount described in paragraph (3) of subdivision (a) to the satisfaction of the money judgment. (f) Where the amounts described in paragraph (3) of subdivision (a) are payable periodically, the amount of such periodic payment that may be applied to the satisfaction of a money judgment is the amount that may be withheld from a like amount of earnings under Chapter 5 (commencing with Section 706.010) (Wage Garnishment Law).

704.120. (a) Contributions by workers payable to the Unemployment Compensation Disability Fund and by employers payable to the Unemployment Fund are exempt without making a claim. (b) Before payment, amounts held for payment of the following benefits are exempt without making a claim: (1) Benefits payable under Division 1 (commencing with Section 100) of the Unemployment Insurance Code. (2) Incentives payable under Division 2 (commencing with Section 5000) of the Unemployment Insurance Code. (3) Benefits payable under an employer's plan or system to supplement unemployment compensation benefits of the employees generally or for a class or group of employees. (4) Unemployment benefits payable by a fraternal organization to its bona fide members. (5) Benefits payable by a union due to a labor dispute. (c) After payment, the benefits described in subdivision (b) are exempt. (d) During the payment of benefits described in paragraph (1) of subdivision (b) to a judgment debtor under a support judgment, the judgment creditor may, through the appropriate district attorney, seek to apply the benefit payment to satisfy the judgment as provided by Section 11350.5 of the Welfare and Institutions Code. (e) During the payment of benefits described in paragraphs (2) to (5), inclusive, of subdivision (b) to a judgment debtor under a support judgment, the judgment creditor may, directly or through the appropriate district attorney, seek to apply the benefit payments to satisfy the judgment by an earnings assignment order for support as defined in Section 706.011 or any other applicable enforcement procedure. If the benefit is payable periodically, the amount to be withheld pursuant to the assignment order or other procedure shall be 25 percent of the amount of each periodic payment or any lower amount specified in writing by the judgment creditor or court order, rounded down to the nearest whole dollar. Otherwise the amount to be withheld shall be the amount the court determines under subdivision (c) of Section 703.070. The paying entity may deduct from each payment made pursuant to an assignment order under this subdivision an amount reflecting the actual cost of administration caused by the assignment order up to two dollars ($2) for each payment.

704.130. (a) Before payment, benefits from a disability or health insurance policy or program are exempt without making a claim. After payment, the benefits are exempt. (b) Subdivision (a) does not apply to benefits that are paid or payable to cover the cost of health care if the judgment creditor is a provider of health care whose claim is the basis on which the benefits are paid or payable. (c) During the payment of disability benefits described in subdivision (a) to a judgment debtor under a support judgment, the judgment creditor or district attorney may seek to apply the benefit payments to satisfy the judgment by an earnings assignment order for support, as defined in Section 706.011, or any other applicable enforcement procedure, but the amount to be withheld pursuant to the earnings assignment order or other procedure shall not exceed the amount permitted to be withheld on an earnings assignment order for support under Section 706.052.

704.140. (a) Except as provided in Article 5 (commencing with Section 708.410) of Chapter 6, a cause of action for personal injury is exempt without making a claim. (b) Except as provided in subdivisions (c) and (d), an award of damages or a settlement arising out of personal injury is exempt to the extent necessary for the support of the judgment debtor and the spouse and dependents of the judgment debtor. (c) Subdivision (b) does not apply if the judgment creditor is a provider of health care whose claim is based on the providing of health care for the personal injury for which the award or settlement was made. (d) Where an award of damages or a settlement arising out of personal injury is payable periodically, the amount of such periodic payment that may be applied to the satisfaction of a money judgment is the amount that may be withheld from a like amount of earnings under Chapter 5 (commencing with Section 706.010) (Wage Garnishment Law).

704.150. (a) Except as provided in Article 5 (commencing with Section 708.410) of Chapter 6, a cause of action for wrongful death is exempt without making a claim. (b) Except as provided in subdivision (c), an award of damages or a settlement arising out of the wrongful death of the judgment debtor' s spouse or a person on whom the judgment debtor or the judgment debtor's spouse was dependent is exempt to the extent reasonably necessary for support of the judgment debtor and the spouse and dependents of the judgment debtor. (c) Where an award of damages or a settlement arising out of the wrongful death of the judgment debtor's spouse or a person on whom the judgment debtor or the judgment debtor's spouse was dependent is payable periodically, the amount of such a periodic payment that may be applied to the satisfaction of a money judgment is the amount that may be withheld from a like amount of earnings under Chapter 5 (commencing with Section 706.010) (Wage Garnishment Law).

704.160. (a) Except as provided by Chapter 1 (commencing with Section 4900) of Part 3 of Division 4 of the Labor Code, before payment, a claim for workers' compensation or workers' compensation awarded or adjudged is exempt without making a claim. Except as specified in subdivision (b), after payment, the award is exempt. (b) Notwithstanding any other provision of law, during the payment of workers' compensation temporary disability benefits described in subdivision (a) to a support judgment debtor, the support judgment creditor may, through the appropriate district attorney, seek to apply the workers' compensation temporary disability benefit payment to satisfy the support judgment as provided by Section 11350.1 of the Welfare and Institutions Code. (c) Notwithstanding any other provision of law, during the payment of workers' compensation temporary disability benefits described in subdivision (a) to a support judgment debtor under a support judgment, including a judgment for reimbursement of public assistance, the judgment creditor may, directly or through the appropriate district attorney, seek to apply the temporary disability benefit payments to satisfy the support judgment by an earnings assignment order for support, as defined in Section 5208 of the Family Code, or any other applicable enforcement procedure. The amount to be withheld pursuant to the earnings assignment order for support or other enforcement procedure shall be 25 percent of the amount of each periodic payment or any lower amount specified in writing by the judgment creditor or court order, rounded down to the nearest dollar. Otherwise, the amount to be withheld shall be the amount the court determines under subdivision (c) of Section 703.070. The paying entity may deduct from each payment made pursuant to an order assigning earnings under this subdivision an amount reflecting the actual cost of administration of this assignment, up to two dollars ($2) for each payment. (d) Unless the provision or context otherwise requires, the following definitions govern the construction of this section. (1) "Judgment debtor" or "support judgment debtor" means a person who is owing a duty of support. (2) "Judgment creditor" or "support judgment creditor" means the person to whom support has been ordered to be paid. (3) "Support" refers to an obligation owing on behalf of a child, spouse, or family; or an amount owing pursuant to Section 11350 of the Welfare and Institutions Code. It also includes past due support or arrearage when it exists.

704.170. Before payment, aid provided pursuant to Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or similar aid provided by a charitable organization or a fraternal benefit society as defined in Section 10990 of the Insurance Code, is exempt without making a claim. After payment, the aid is exempt.

704.180. Before payment, relocation benefits for displacement from a dwelling which are to be paid pursuant to Chapter 16 (commencing with Section 7260) of Division 7 of Title 1 of the Government Code or the federal "Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970" (42 U.S.C. Sec. 4601 et seq.), as amended, are exempt without making a claim. After payment, the benefits are exempt.

704.190. (a) As used in this section, "institution of higher education" means "institution of higher education" as defined in Section 1141(a) of Title 20 of the United States Code, as amended. (b) Before payment, financial aid for expenses while attending school provided to a student by an institution of higher education is exempt without making a claim. After payment, the aid is exempt.

704.200. (a) As used in this section: (1) "Cemetery" has the meaning provided by Section 7003 of the Health and Safety Code. (2) "Family plot" is a plot that satisfies the requirements of Section 8650 of the Health and Safety Code. (3) "Plot" has the meaning provided by Section 7022 of the Health and Safety Code. (b) A family plot is exempt without making a claim. (c) Except as provided in subdivision (d), a cemetery plot for the judgment debtor and the spouse of the judgment debtor is exempt. (d) Land held for the purpose of sale or disposition as cemetery plots or otherwise is not exempt. 704.210. Property that is not subject to enforcement of a money judgment is exempt without making a claim.

Homestead Exemption

704.710. As used in this article: (a) "Dwelling" means a place where a person resides and may include but is not limited to the following: (1) A house together with the outbuildings and the land upon which they are situated. (2) A mobilehome together with the outbuildings and the land upon which they are situated. (3) A boat or other waterborne vessel. (4) A condominium, as defined in Section 783 of the Civil Code. (5) A planned development, as defined in Section 11003 of the Business and Professions Code. (6) A stock cooperative, as defined in Section 11003.2 of the Business and Professions Code. (7) A community apartment project, as defined in Section 11004 of the Business and Professions Code. (b) "Family unit" means any of the following: (1) The judgment debtor and the judgment debtor's spouse if the spouses reside together in the homestead. (2) The judgment debtor and at least one of the following persons who the judgment debtor cares for or maintains in the homestead: (A) The minor child or minor grandchild of the judgment debtor or the judgment debtor's spouse or the minor child or grandchild of a deceased spouse or former spouse. (B) The minor brother or sister of the judgment debtor or judgment debtor's spouse or the minor child of a deceased brother or sister of either spouse. (C) The father, mother, grandfather, or grandmother of the judgment debtor or the judgment debtor's spouse or the father, mother, grandfather, or grandmother of a deceased spouse. (D) An unmarried relative described in this paragraph who has attained the age of majority and is unable to take care of or support himself or herself. (3) The judgment debtor's spouse and at least one of the persons listed in paragraph (2) who the judgment debtor's spouse cares for or maintains in the homestead. (c) "Homestead" means the principal dwelling (1) in which the judgment debtor or the judgment debtor's spouse resided on the date the judgment creditor's lien attached to the dwelling, and (2) in which the judgment debtor or the judgment debtor's spouse resided continuously thereafter until the date of the court determination that the dwelling is a homestead. Where exempt proceeds from the sale or damage or destruction of a homestead are used toward the acquisition of a dwelling within the six-month period provided by Section 704.720, "homestead" also means the dwelling so acquired if it is the principal dwelling in which the judgment debtor or the judgment debtor's spouse resided continuously from the date of acquisition until the date of the court determination that the dwelling is a homestead, whether or not an abstract or certified copy of a judgment was recorded to create a judgment lien before the dwelling was acquired. (d) "Spouse" does not include a married person following entry of a judgment decreeing legal separation of the parties, unless such married persons reside together in the same dwelling.

704.720. (a) A homestead is exempt from sale under this division to the extent provided in Section 704.800. (b) If a homestead is sold under this division or is damaged or destroyed or is acquired for public use, the proceeds of sale or of insurance or other indemnification for damage or destruction of the homestead or the proceeds received as compensation for a homestead acquired for public use are exempt in the amount of the homestead exemption provided in Section 704.730. The proceeds are exempt for a period of six months after the time the proceeds are actually received by the judgment debtor, except that, if a homestead exemption is applied to other property of the judgment debtor or the judgment debtor's spouse during that period, the proceeds thereafter are not exempt. (c) If the judgment debtor and spouse of the judgment debtor reside in separate homesteads, only the homestead of one of the spouses is exempt and only the proceeds of the exempt homestead are exempt.

704.730. (a) The amount of the homestead exemption is one of the following: (1) ($75,000) unless the judgment debtor or spouse of the judgment debtor who resides in the homestead is a person described in paragraph (2) or (3). (2) ($100,000) if the judgment debtor or spouse of the judgment debtor who resides in the homestead is at the time of the attempted sale of the homestead a member of a family unit, and there is at least one member of the family unit who owns no interest in the homestead or whose only interest in the homestead is a community property interest with the judgment debtor. (3) ($150,000)** if the judgment debtor or spouse of the judgment debtor who resides in the homestead is at the time of the attempted sale of the homestead any one of the following: (A) A person 65 years of age or older. (B) A person physically or mentally disabled and as a result of that disability is unable to engage in substantial gainful employment. There is a rebuttable presumption affecting the burden of proof that a person receiving disability insurance benefit payments under Title II or supplemental security income payments under Title XVI of the federal Social Security Act satisfies the requirements of this paragraph as to his or her inability to engage in substantial gainful employment. (C) A person 55 years of age or older with a gross annual income of not more than fifteen thousand dollars ($15,000) or, if the judgment debtor is married, a gross annual income, including the gross annual income of the judgment debtor's spouse, of not more than twenty thousand dollars ($20,000) and the sale is an involuntary sale. (b) Notwithstanding any other provision of this section, the combined homestead exemptions of spouses on the same judgment shall not exceed the amount specified in paragraph (2) or (3), whichever is applicable, of subdivision (a), regardless of whether the spouses are jointly obligated on the judgment and regardless of whether the homestead consists of community or separate property or both. Notwithstanding any other provision of this article, if both spouses are entitled to a homestead exemption, the exemption of proceeds of the homestead shall be apportioned between the spouses on the basis of their proportionate interests in the homestead.

**This amount may be limited to $125,000 by Federal Law depending on how long the property has been owned prior to filing the bankruptcy case.

Friday, January 7, 2011

One of the main questions I had when I filed bankruptcy was about bankruptcy and property. I was very concerned with what was going to happen to my property in bankruptcy.

Having gone through bankruptcy and having received a discharge, I now know the answer to this and it depends on which bankruptcy chapter you file. In a chapter 13, you are put on a payment plan (not to exceed five years) that you can afford, and you keep all of your property.

A chapter 7 bankruptcy is different. The premise is that it is a "liquidation" of assets. In theory, your assets are sold to pay your creditors what is possible and then you are free and clear (discharged) to go about your business.

Don't freak out here.....you probably have less "assets" than you think. Plus, you are allowed a certain amount of property exemptions...monetary amounts of stuff you can keep regardless.

The truth is that most people who qualify for chapter 7 don't have many (or any) assets to be liquidated. I didn't have to forfeit any property~ bankruptcy truly gave me a fresh start and that is pretty common.

Bankruptcy property exemptions are complicated. There are federal exemptions and there are state exemptions. Some states will give you a choice between using the exemptions of the state or the federal exemptions. But some states will not let you choose. You have to use the bankruptcy exemptions of that state.

The states that will not allow you to use the federal property exemptions for bankruptcy are Alaska, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

You will need to value your stuff in order to figure out how much of it is exempt. One thing to keep in mind when valuing your stuff is that your stuff isn't worth what you think it is. You may have paid 2000.00 for your couch two years ago, but it's only worth a tiny fraction of that now.

My lawyer had me value most of my items at "garage sale prices" and that's exactly what I did. However, I am not an attorney so please discuss this with yours.

You may have other considerations when it comes to your property in a chapter 7. It is possible to keep items for which you have secured loans, such as a house, or car, by either reaffirming or doing what is called a ride-through. In either case, you keep paying for them. Which of the two, if either, you do, will depend on your wants and circumstances so---yeah---another thing to discuss with your bankruptcy lawyer.

Another thing that you should know is that you must have lived for two years in the state in which you are filing bankruptcy to use the exemptions of that state. Otherwise the exemptions of the state in which you lived in for six months prior your move will apply.

The laws regarding bankruptcy and property can be a bit confusing but try not to panic. A good bankruptcy attorney will make it so you retain as much, if not all, of your property as possible.

I will list the California bankruptcy exemptions (California gives filers a choice of two sets) in another post.